Energy justice nonprofit: PREB interim wheeling to hinder wheeling sector development

By The Star Staff

The Puerto Rico Energy Bureau (PREB) recently proposed an interim wheeling rate that would result in the hindering of the development of the wheeling sector, according to the Institute for Competitiveness and Economic Sustainability (ICSE by its Spanish initials).

Wheeling entails the transfer of energy from a supplier to a customer, which on the island would mean using the power lines of the Puerto Rico Electric Power Authority (PREPA).

ICSE -- which describes itself on its website as “an action-oriented non-profit educational organization under Section 501 (c) (3) of the Internal Revenue Code” that “plan[s], educate[s] and coordinate[s] the execution of key economic reforms for the sustainable socio-economic well-being of Puerto Rico” -- had advised the PREB prior to its decision that the regulator needed to ensure that all customers pay their share of transition and stranded costs so third parties compete against PREPA’s cost of supply.

In an order titled “Procedures for the Development of an Interim Unbundling Rate and Full Unbundling,” the PREB announced that it was going to bifurcate the wheeling process into two proceedings as it had authority under the law to do so.

The first proceeding “will be the establishment of an interim wheeling rate so that the wheeling process may begin for wheeling customers who are eager to finalize power purchase agreements for the development of sources of generation to serve their load,” the order said.

The second process entails the full unbundling of rates by function and customer class as well as stranded costs.

The proposed interim unbundled rate that a wheeling customer would pay PREPA, however, “would be the full retail rate minus the fuel and purchase costs,” according to PREB in an order issued Oct. 14.

The interim wheeling rate would make the costs of wheeling too expensive, ICSE maintains, and repeal any incentive for customers to leave PREPA for other suppliers. Wheeling customers will end up paying between 22 cents to 23 cents per kilowatt-hour (kWh), which is the same amount they will pay if they get their energy from PREPA.

To illustrate wheeling costs using PREB’s formula, a customer that receives a bill for $130 would have to subtract fuel and purchase costs, for a resulting amount of $80. Then the resulting dollar amount is divided by the residential customer’s monthly consumption, which in the example was 710 kWh, to obtain the resulting wheeling charge, which is 8.8 cents. If the customer, for example, gets its energy from Company X, which charges 15 cents per kWh, the 8.8 cents would have to be added to the rate. That means the customer will end up paying 23.8 cents per kWh for service.

“This would result in excessive wheeling charges at the transmission level for commercial and industrial consumers of up to 10 cents per kWh,” Tomás Torres, PREPA’s consumer representative, said, adding that such charges are generally much smaller.

The PREB said it imposed the temporary rate to allow certain power purchase operating agreements with wheeling customers to move forward, but John Jordan, managing director for bond insurer National Public Finance Guarantee Corp., commented in written remarks that he did not see the need for a rush.

“Moreover, National notes that the proposal to implement wheeling on an accelerated schedule does not appear to account for the significant changes that will need to occur to billing systems, load management, communication systems, and more,” Jordan wrote. “If these changes cannot occur prior to the completion of full unbundling, then any value of an Interim Unbundled Rate is diminished. National is also concerned about the multitude of regulatory cases that remain pending and, like this case, intermittently move forward (or not) after long periods of inactivity. It suggests these proceedings may not be optimally sequenced for timely and efficient resolution. Many objectives have been set forth for the future electrical system. It will take planning, deliberation, and persistence to achieve those objectives.”

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